Tatas plan shipping foray to meet captive needs

By Vivin Matthew, CNBC-TV18

The Tata Group is planning on having its own shipping company that will offer logistical services to all Tata Group companies. The Tatas want to sail on the high seas. We learn that the group wants to start a shipping company that can be used by all group companies.

Last year, Tata Steel transported about 4 million tonne of materials to various parts of the world: coking coal from Australia to the east coast of India, met coke from Japan and China to India, limestone from Iran, Thailand and Yemen to the east coast of India, ferro alloys, chrome ore from India to China, Korea and Japan, steel from India to South East Asia, Europe and the US.

All this while the company produces only about 6 million tonne of steel in India. Over the next few years, that number is expected to jump to 15 million tonne when most of the hot rolled coils produced in India will be sent to Natsteel plants across Asia and Corus plants across Europe and the US for value addition.

Also, over the next few years Tata Steel will have developed its mines in Mozambique and the Ivory Coast from where the company can bring in over 500 million tonne of coal and iron ore every year, some of that to India and some of that to Natsteel in Asia and Corus in Europe and the US.

That is just one Tata Group company. Virtually, all of them like Tata Power, Tata Metaliks and Tata Motors will need large transport capabilities as they scale up and go global. And that's where the group shipping company comes in.

CNBC-TV18 learns that currently the thinking within the group is that all the group companies will invest money into this company to buy ships and set up full-fledged transport capabilities.

Interestingly, Tata Steel already has a 50:50 joint venture with Japanese shipping major NYK. That company currently has a fleet of six vessels. Also Tata Power has just sought shareholder approval to raise Rs 4,000 crore to enter the shipping business.

However, sources tell us that the group wants to consolidate all these shipping requirements under one company. That process however could take a few years as first all the raw material sources will need to be tied up.

Having its own shipping business makes sense for the group say analysts because shipping charges for iron ore have more than doubled and that for coking and thermal coal have more than tripled in the last six months.

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